{"id":6963,"date":"2024-08-21T00:30:00","date_gmt":"2024-08-21T00:30:00","guid":{"rendered":"https:\/\/www.brightmine.com\/us\/?post_type=resources&p=6963"},"modified":"2026-02-05T04:33:47","modified_gmt":"2026-02-05T09:33:47","slug":"ftc-noncompete-rule-blocked","status":"publish","type":"resources","link":"https:\/\/www.brightmine.com\/us\/resources\/hr-compliance\/employment-agreements\/ftc-noncompete-rule-blocked\/","title":{"rendered":"FTC noncompete rule blocked"},"content":{"rendered":"\n
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by Robert S. Teachout<\/strong>, Legal Editor at Brightmine<\/p>\n<\/div>\n\n\n\n

A federal court in Texas has permanently blocked<\/a> nationwide the Federal Trade Commission (FTC) final rule banning noncompete agreements<\/a>. The rule was set to go into effect in two weeks, on September 4. The same court earlier issued a preliminary injunction barring the rule<\/a> that was limited to only the named plaintiffs.<\/p>\n\n\n\n

The rule would have required employers to rescind existing noncompete agreements and actively notify workers that they are no longer in effect, except in the case of existing noncompete agreements for senior executives. New noncompete agreements were banned.<\/p>\n\n\n\n

In its ruling, the court followed its earlier reasoning and held that the FTC exceeded its statutory rulemaking authority. The court found that the text, structure and history of the Federal Trade Commission Act shows that the agency can issue only “housekeeping” rules \u2014 rules concerning procedure and practice \u2014 regarding unfair methods of competition as opposed to substantive rules. This finding is further supported, the court said, by the FTC’s lack of any authority to impose penalties for violation.<\/p>\n\n\n\n

‘Arbitrary and capricious’<\/h2>\n\n\n\n

The court also held that the rule was “arbitrary and capricious” in violation of the Administrative Procedure Act. The court concluded that the noncompete rule was unreasonably overbroad without a reasonable explanation. “The rule imposes a one-size-fits-all approach with no end date, which fails to establish a rational connection between the facts found and the choice made,” the court said.<\/p>\n\n\n\n

“The commission’s lack of evidence as to why they chose to impose such a sweeping prohibition \u2014 that prohibits entering or enforcing virtually all non-competes \u2014 instead of targeting specific, harmful non-competes, renders the Rule arbitrary and capricious.”<\/p>\n\n\n\n

A federal district court in Florida had made similar findings this week, issuing an injunction against the rule on behalf of the plaintiff. However, a Pennsylvania court ruled in favor of the FTC, finding that the agency did have broad rulemaking authority. The question of whether the rule was arbitrary and capricious was not raised in that case.<\/p>\n\n\n\n

Victoria Graham, an FTC spokesperson, said that the agency is disappointed in the ruling and is “seriously considering a potential appeal.” “Today’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions,” she added.<\/p>\n\n\n\n

Although the federal rule has been blocked, employers must still comply with an array of state laws governing the use of noncompete agreements<\/a>.<\/p>\n<\/div>\n\n\n\n

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Noncompete Laws by State<\/a><\/h3>\n\t\t\t\t\t\t

Review comprehensive noncompete regulations across all states to ensure your employment agreements meet current legal requirements.<\/p>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\n<\/div>\n<\/section><\/div>\n\n\n\n

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About the author<\/h3>\n\n\n\n
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\"Robert<\/figure>\n<\/div>\n\n\n\n
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Robert S. Teachout, SHRM – SCP<\/strong>
Legal Editor, Brightmine<\/p>\n\n\n\n

Robert Teachout has more than 30 years’ experience in legal publishing covering employment laws on the state and federal level. At Brightmine, he covers labor relations, performance appraisals and promotions, succession and workforce planning, HR professional development and employment contracts. He often writes on the intersection of compliance with HR strategy and practice.<\/p>\n\n\n\n

Before joining Brightmine, Robert was a senior HR editor at Thompson Information Services, covering FMLA, ADA, EEO issues and federal and state leave laws. Prior to that he was the primary editor of Bloomberg BNA’s State Labor Laws binders and was the principal writer and editor of the State Wage Assignment and Garnishment Handbook. Robert also served as a union unit leader and shop steward in the Washington-Baltimore Newspaper Guild of the Communications Workers of America. Actively involved in the HR profession, Robert is a member of SHRM at both the national and local levels, and gives back to the profession by serving as the communications vice president on the board of his local chapter.<\/p>\n\n\n\n

Connect with Robert on LinkedIn<\/a> and X<\/a><\/p>\n<\/div>\n<\/div>\n<\/div>\n\n\n\n

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    A federal court in Texas has permanently blocked the FTC’s broad ban on noncompete agreements. 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